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Title: |
Real Exchange Rate, Capital Account, and Current Account? |
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Source: |
The Conference on Web Based Business Management (WBM 2010 E-BOOK)
(pp 855-860)
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Author(s): |
Shihua Hu, College of Economics and Management,Southwest University, Chongqing,China,400715
Wei Liu, Administration College of Chongqing Technology and Business University, Chongqing,China,400067 |
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Abstract: |
On the basis of probing into the mechanism about how the capital account affects the current account and by the means of time series analysis,this paper empirically tests the relationship between the capital account and the current account in China within a 4-variables system.It discovers that,there is a long term co-integration among the current account,the capital account,the real exchange rate and GDP in China.There is an unidirectional causality from the capital account,the real exchange rate and GDP to the current account. The increasing capital account surplus and the devaluating real exchange rate improve the current account; the increasing GDP deteriorates the current account.The policy implication is that,the current account could be effectively adjusted by controlling some key macro-variables including capital account.
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